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28 November 2019

Disney’s BT love-in will occlude Sky in Comcast’s shadow

Disney has been carefully picking its way through the world’s pay TV operators as it plots its new strategy centered around global streaming. While it does not realistically expect to achieve leadership within the next five years, it has set its sights on gaining 100 million subscribers by 2025. Even in the unlikely event that target were reached it would probably be around half the Netflix total and behind Amazon Prime Video as well, but would be right in the mix ahead perhaps of Apple TV+, Comcast’s NBCU Peacock and AT&T’s HBO Max.

The strategy is nuanced in so far that it combines pushing D2C with courting established pay TV operators to maximize reach. At the same time, its streaming strategy has three components, Disney+ for a wide range of content slanted somewhat towards families, with ESPN+ for sport and the ad-supported Hulu for adult content, available as individual offerings or bundled in the case of D2C. This last aspect has only crystalized so far in the US, where on November 12, Disney+ was rolled out at $6.99 a month or $69.99 a year. However, a full bundle including ESPN+ and Hulu was little more at $15 a month.

Elsewhere, Disney+ and the full bundle will arrive within the next two years, with timing determined more by when existing rights deals with various distributors expire than technical factors. That means Disney+ became available in Canada and the Netherlands the same day as the US, with Australia and New Zealand following a week later but some European markets including the UK waiting until March 31 2020. Broadcasters in these countries often have pre-existing deals with 20th Century Fox dating back to before Disney took it over, which have to run their course to give the new streaming service a full catalog of content upon launch.

The UK is interesting because it highlights Disney’s ambivalent strategy. Disney is in talks with BT at the moment about making Disney+ available over the latter’s pay TV service, which has 1.9 million customers with some FTA channels distributed DTT and the rest over its broadband network. For BT, acquiring Disney+ content fits with its super-aggregation strategy that has seen it mend bridges with rival Sky and distribute the latter’s sports as well as movie suites, while still competing for customers. This is a classic case of co-opetition where erstwhile competitors cooperate when it is in their mutual advantage, for example over infrastructure or to face off common foes, in this case including the big streamers themselves. Indeed, BT is also in co-opetition with Disney which will also be offering its packages D2C via just about any of the major devices for accessing its app, including Apple TV and iOS, Google Chromecast, Android, Android TV, Sony PlayStation 4, Roku, Microsoft’s Xbox One and Amazon Fire, along with smart TVs from both Samsung and LG.

But in the case of Sky, which has 23 million pay TV subscribers in Europe and 12.5 million in the UK, a deal with Disney is much less likely because there the competitive dimension looms larger. Sky is now owned by Comcast, whose NBC Universal is readying to launch its ad-supported Peacock streaming service in April 2020, which will be a direct competitor to Disney+.

That leaves Liberty Global’s Virgin Media in the UK, number two to Sky with 3.84 million video customers, also interested in Disney+ as a super-aggregator itself but with no confirmation of talks. Elsewhere in Europe, Disney+ is also seeking deals with major distributors and is in advanced stages of discussions with Canal+ in France over what could well become an exclusive arrangement there. This could involve Disney+ being offered as a bundle within Canal+’s flagship channel, or available as a standalone pay TV option. This could mean Disney+ being excluded from France’s main IPTV or OTT services from Orange, Free and SFR, but would still reach the 8 million subscribers of Canal+, which like BT has been repositioning itself as an aggregator of content, including third-party streaming services, alongside its own proprietary pay TV channels.

This also suits Disney which is trying to reinvent itself as a major global streaming platform without cannibalizing its established distribution revenues too quickly. At the same time, it wants to gain maximum momentum for Disney+, which therefore entails having some reach via legacy pay TV while avoiding being available via all such platforms in a given territory.